WDPG 3.5 Making a decision to wind-down

WDPG 3.5.1G09/12/2016

1In the event of a severe stress, a firm may have one or more potential options that might enable it to recover and return to a viable position, for example, finding potential investors to acquire or invest in the failing business. However, in spite of management actions, there may be no effective way to recover from a severe stress; at that stage consideration of the wind-down plan becomes relevant.

WDPG 3.5.2G09/12/2016

The firm’sgoverning body will need to make a formal decision to wind down in a timely manner. The wind-down plan can help the firm’sgoverning body evaluate how viable any potential recovery options are against the risk of a disorderly failure if the decision to wind down is delayed or deferred for too long.

WDPG 3.5.3G09/12/2016

Establishing clear indicators and thresholds can help a firm’sgoverning body to make timely decisions. The governing body can also refer to the firm’s wind-down scenario analysis to provide an indication of the minimum financial and non-financial resources needed to ensure the orderly winding down of the firm’s activities. Deferring the wind-down decision to a point where that level of resources is no longer available would significantly increase both the risk and scale of a disorderly failure.

WDPG 3.5.4G09/12/2016

Firms may identify what regulated activities they will cease once the wind-down decision is made. For instance, a firm should not normally take on any more new clients once that decision is made.

If the governing body takes the decision to wind down, we would recommend allocating a person or group within the senior management team with the role of coordinating, directing and implementing the wind-down process and ensuring prompt dissemination of information relevant to decision-making at the governing body level. Many elements of these governance, oversight and operational arrangements can be established, in principle, in advance as part of a firm’s wind-down planning.

WDPG 3.5.8G09/12/2016

Firms should inform the FCA as soon as there are signs of a potential failure or any other causes for winding down, as well as of the actual wind-down decision. Early engagement with the FCA will help to deal with relevant regulatory issues. They should also consider whether to start communications with various stakeholders (see WDPG 4.2 (Communications plan)).